UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
-OR-
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to__________________
Commission File No. 0-30786
LSI COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0627349
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
112 West Business Park Drive
Draper, Utah 84020
(801) 572-2555
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
(1) Yes [X] No [ ] (2) Yes [ ] No [X]
At June 30, 2000, there were 11,415,632 shares of common stock, par value $.001
per share, of the registrant outstanding.
Transitional small business disclosure format: Yes [ ] No [X]
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LSI COMMUNICATIONS, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets as of June 30, 2000
and December 31, 1999..........................................3
Statements of Operations for the six months ended
June 30, 2000 and June 30, 1999................................4
Statements of Cash Flows for the six months ended
June 30, 2000 and June 30, 1999................................5
Note to Consolidated Financial Statements........................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................7
PART II. OTHER INFORMATION
ITEM 1 - Legal Proceedings............................................10
ITEM 2 - Changes in Securities........................................10
ITEM 3 - Defaults upon Senior Securities..............................10
ITEM 4 - Submission of Matter to Vote of Security Holders.............10
ITEM 5 - Other Information............................................10
ITEM 6 - Exhibits and Reports on Form 8-K Page........................10
SIGNATURES.................................................................11
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LSI COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEET
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
(UNAUDITED)
ASSETS
June 30, December 31,
2000 1999
-------- --------
CURRENT ASSETS
<S> <C> <C>
Cash & Cash Equivalents $146,350 $18,393
Inventory 4,347 4,546
Accounts Receivable (Net of allowance of $7,000 and 13,000,
respectively) 65,443 157,829
Notes & Employee Receivable 200 226,800
-------- --------
Total Current Assets 216,340 407,568
-------- --------
PROPERTY & EQUIPMENT
(Net of Accumulated Depreciation) 38,068 26,135
-------- --------
OTHER ASSETS
Deposits & Prepaids 6,076 6,076
-------- --------
Total Other Assets 6,076 6,076
-------- --------
TOTAL ASSETS $260,484 $439,779
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30 December 31,
2000 1999
-------- --------
CURRENT LIABILITIES
Accounts payable $22,248 $22,858
Accrued expenses 19,872 34,410
Customer Deposits 11,542
Current portion of long-term liabilities 93,360 195,081
Deferred Revenue 981 1,962
Deferred Compensation 91,000 91,000
-------- --------
Total Current Liabilities 239,003 345,311
-------- --------
LONG TERM LIABILITIES
Notes payable - 37,368
Notes payable-related party 109,919 166,587
Less current portion (93,360) (195,081)
-------- --------
Total long term Liabilities 16,559 8,874
TOTAL LIABILITIES 255,562 354,185
-------- --------
Minority Interest - -
-------- --------
STOCKHOLDERS' EQUITY
Common stock, authorized 50,000,000 shares of $.001
par value, issued and outstanding 11,415,632 and 8,915,632
shares, respectively 11,416 8,916
Additional Paid-in capital 731,598 731,598
Retained Earnings (738,092) (654,920)
-------- --------
Total Stockholders' Equity 4,922 85,594
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $260,484 $439,779
======== ========
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LSI COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
(UNAUDITED)
For the Period Ended
June 30, June 30,
2000 1999
---------- ---------
REVENUES
<S> <C> <C>
Software Sales $ 19,706 $ 75,064
Training Sales 596,672 -
---------- ---------
TOTAL REVENUES 616,378 75,064
---------- ---------
COST OF SALES
Software 199 2,185
Training 154,069 -
---------- ---------
TOTAL COST OF GOODS SOLD 154,268 2,185
---------- ---------
GROSS PROFIT 462,110 72,879
---------- ---------
SELLING EXPENSES 205,636 11,568
PAYROLL 148,791 45,133
RESEARCH & DEVELOPMENT 2,905 8,927
CONSULTING FEE - 85,000
GENERAL & ADMINISTRATIVE EXPENSES 190,778 63,535
---------- ---------
TOTAL OPERATING EXPENSES 548,110 214,162
---------- ---------
OPERATING INCOME (LOSS) (86,000) (141,283)
---------- ---------
OTHER INCOME AND (EXPENSES)
Forgiveness of Debt 13,368 -
Miscellaneous income (expense) (5,275) (903)
Interest expense (5,266) (646)
---------- ---------
Total Other Income and (Expenses) 2,827 (1,549)
---------- ---------
NET INCOME (LOSS) BEFORE INCOME TAXES (83,173) (142,833)
---------- ---------
PROVISION FOR INCOME TAXES - -
---------- ---------
NET INCOME (LOSS) (83,173) (142,833)
========== =========
NET INCOME (LOSS) PER SHARE (0.008) (0.024)
========== =========
WEIGHTED AVERAGE OUTSTANDING SHARES 10,989,808 6,020,502
========== =========
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<CAPTION>
LSI COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
(UNAUDITED)
For the Period Ended
June 30, June 30,
2000 1999
---------- ---------
Cash Flows From Operating Activities
<S> <C> <C>
Net income (loss) ($83,173) ($142,833)
Non-cash items:
Depreciation 7,504 4,760
Bad Debt 7,000 -
Issuance of stock for remaining 15% Warever shares 2,500 -
Consulting Expense paid with stock issuance - 85,000
Recognition of Deferred Revenue (980) -
(Increase)/decrease in currents assets:
Accounts receivable 98,186 (6,720)
Inventory 199 572
Increase/(decrease) in currents liabilities:
Accounts payable (610) 10,596
Accrued expense (14,438) -
Customer Deposits 11,442 3,621
---------- ---------
Net Cash Provided (Used) by Operating Activities 27,630 (45,004)
---------- ---------
Cash Flows From Investing Activities
Cash received in sale of contract 226,800 -
Cash paid for property, equipment and software technology (19,437) -
---------- ---------
Net Cash Provided (Used) by Investing Activities 207,363 -
---------- ---------
Cash Flows From Financing Activities
Factoring Fees (13,000) -
Increase in long-term debt - 63,500
Principal payments on long-term debt (94,036) (42,568)
---------- ---------
Net Cash Provided (Used) by Financing Activities (107,036) 20,932
---------- ---------
Increase/(decrease) in Cash 127,957 (24,072)
Cash and Cash Equivalents at Beginning of Period 18,393 24,418
Cash and Cash Equivalents at End of Period $146,350 346
Supplemental Cash Flow Information:
Cash paid for interest $5,266 $646
Cash paid for income taxes - -
</TABLE>
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LSI COMMUNICATIONS, INC.
NOTE TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
(UNAUDITED)
1. Basis of presentation:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-QSB and Item 310 of Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. The unaudited financial statements should be read in
conjunction with the financial statements for the year ended December 31, 1999
and footnotes thereto included in the Company's registration statement on Form
10SB12G.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements made by the Company
pursuant to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements reflect our current views with
respect to such future events. Actual results may vary materially and adversely
from those anticipated, believed, estimated or otherwise indicated. Factors that
could cause actual results to differ adversely include, without limitation,
inability to maintain sources of coaching customers timing differences between
the scheduled and actual launch date of new products, and lack of consumer
demand for such products. We do not undertake to update any forward-looking
statement that may be made from time to time by or on our behalf.
(a) Introduction
We are a technology development, sales and training company based in
Draper, Utah. We operate two distinct, but complementary subsidiaries, Warever
Corporation and Coaching Institute, Inc.
Coaching Institute, Inc. offers fully integrated "coaching" programs
designed specifically for sales trainers, seminar leaders, motivational speakers
and network marketers who are interested in extending their programs to seminar
attendees through one-on-one training. By implementing an after-market program
such as one-on-one coaching, companies are able to assist clients' personal
development, create additional profits, and increase client loyalty.
Warever Corporation develops, programs, sells, and markets computer
software packages. Its primary product, Action Plus, is a management assistance
software tool. Warever Corporation intends to release Powerbase, a sales force
automation and personal productivity software program, during the third quarter
of 2000.
(b) Results of Operations
(i) Six Months Ended June 30, 2000 and June 30, 1999
Sales Revenues
Sale revenues for the six months ended June 30, 2000 were $616,378, an
increase of $541,314, or 721.1% from $75,064 for the six months ended June 30,
1999. The increase in revenues is due to the acquisition of Coaching Institute.
Warever's software sales, which prior to Coaching Institute's acquisition at the
end of the second quarter of 1999 was our only source of revenues, decreased
73.7% to $19,706 from $75,064 in the first half of 1999. The decrease in
Warever's software sales is a trend that began in 1997 as a result of the
declining demand for Action Plus, our primary software product. We expect the
software sales trend to reverse to some degree in the third quarter of 2000 with
the
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release of PowerBase. However, we have performed no market tests and have
insufficient information to assess the potential demand, if any, for PowerBase.
The overall increase in our sales was due to $596,672 in revenues from
Coaching Institute during the six months ended June 30, 2000. Coaching
Institute's revenues increased $418,807 or 235% from $177,865 during the six
month period ended June 30, 1999. Further discussion and financial statements
related to Coaching Institute's impact on our sales can be found in our
registration statement on Form 10SB12G as filed with the SEC on June 23, 2000.
We hope to maintain and increase coaching revenues from Coaching Institute.
There appears to be a trend toward stable and possibly increased demand for our
coaching services. Our revenues from coaching have been increasing and
Management has observed an increasing number of speakers requesting coaching
services at events such as the annual National Speakers Association convention.
However, despite our increased coaching related revenues and the increased
consumer interest in coaching services perceived by our management, we cannot
ensure that we will be able to maintain or increase revenues from coaching
services.
Cost of Sales
Cost of Sales increased by $152,083, or 7,060.3%, to $154,268 in the 2000
six month period from $2,185 in the comparable 1999 six month period. The
increase was attributable to the acquisition of Coaching Institute and its
relatively expensive product costs. Coaching services are very labor intensive.
Categorizing coaching related salaries in Costs of Good Sold causes of our
exponential Cost of Sales increase. We expect cost of sales related to coaching
services to mirror future increases or decreases in our coaching sales. Cost of
Sales related to software actually decreased by 90.9% due to depleted software
sales. We expect cost of sales related to software sales to increase relative to
sales of our new software product Powerbase.
Selling, General and Administrative Expenses
General and Administrative expenses increased by $127,243, or 300.3%, to
$190,778 in the 2000 six-month period from $63,535 in the 1999 six-month period.
A primary reason for the 2000 six-month period increase is the acquisition of
Coaching Institute in the third quarter of 1999. We now have General and
Administrative expenses for two subsidiaries where we only had one in the
comparable six month period ended June 30, 1999. Causes of increased General and
Administrative related expenses included a $25,123 increase in telephone
expenses, and a $9,481 increase accounting and legal fees.
Selling expenses increased by $194,068, or 1,777.6%, to $205,636 in the
six-month period ended June 30, 2000 from $11,568 in the comparable 1999
six-month period. This increase is the result of Coaching Institute's salaries,
commissions, advertising and
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general sales expenses that were not present on our books prior to Coaching
Institute's acquisition. Selling expenses related to software sales actually
decreased due to retraction of our software selling efforts during the
development phase of Powerbase. We expect our selling expenses to increase as we
expand coaching services and commence marketing of the Powerbase software.
Payroll related expenses increased by $103,658, or 329.7%, to $148,791 in
the six-month period ended June 30, 2000 from $45,133 in the comparable 1999
six-month period. The Payroll line item of our Statement of Operations includes
all salaries, primarily administrative, not related to selling, marketing or
actual coaching. This increase is generally attributable to the expansion of our
administration to accommodate Coaching Institute.
Interest Expense
Interest expense increased by $4,620, or 815.2%, to $5,266 in the 2000
six-month period from $646 in the 1999 six-month period. The increase was
primarily due to interest paid on loans from 1999. The loans were required to
continue our operations.
Net Loss
Our net loss for the 2000 six-month period decreased by $59,660, or 41.8%,
to a net loss of ($83,173) from a net loss of ($142,833) in the comparable 1999
period. This decreased net loss is due to an 821% increase in sales while
increasing general and administrative expenses by only 300%. In addition, no
consulting fees were paid during the 2000 period in contrast to the 1999 six
month period.
(c) Liquidity and Capital Resources
Our liquidity and capital resources as of June 30, 2000 were $146,350, and
as of December 31, 1999 were $18,393, an increase of $127,957 or 795.7%. The
cause of this increase was due to the cash received from the sale of the Karl
Malone video and collections of accounts receivable.
At June 30, 2000, our current liabilities exceeded our current assets by
approximately $22,663, with a ratio of current liabilities to current assets of
approximately 1.1 to 1. Inventory levels were similar on June 30, 2000 compared
to December 31, 1999, because we had not completed testing of our new software
product Powerbase and had not yet began the process of building up our inventory
in preparation for Powerbase's introduction. Accounts receivable were lower due
to collection from one of our large clients, SDI LeGrand.
We expect to satisfy our cash requirements during the next 12 months from
cash on hand and revenues. We have no commitments for significant capital
expenditures over the next 12 months.
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II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
not applicable
ITEM 2. CHANGES IN SECURITIES
not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
not applicable
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
not applicable
ITEM 5. OTHER INFORMATION
not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
No. Description
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LSI COMMUNICATIONS, INC.
By: /s/ Craig Hendricks
------------------------------
Craig Hendricks
Chief Executive Officer, President
Date 8/10/00
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